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Data: tax revenue on gas would drop

The two major sources of revenue lawmakers are studying to help the state repair its crumbling infrastructure will decline in coming years, according to projections submitted to a House committee.(Photo: KEN OSBURN)

COLUMBIA – The two major sources of revenue lawmakers are studying to help the state repair its crumbling infrastructure will decline in coming years, according to projections submitted to a House committee.

The numbers show revenue for both the gas tax and a proposed sales tax would decline in coming years, the result of cars that get better gas mileage, hybrids that use little or no gas and an aging population that doesn't drive as much, state analysts say.

According to data from the U.S. Energy Information Administration, revenue from the state's 16-cent gas tax will decline from $553 million next year to $496 million in 2040.

A sales tax, if enacted on gas, would bring in less money and decline from $518 million to $465 million over the same time period, according to the data.

Adding the sales tax but cutting the gas tax in half would raise $795 million initially and would bring in $713 million by 2040.

Adding a sales tax and keeping all of the gas tax would raise $1 billion, eventually declining to $961 million in 2040, according to the analysis, submitted by the state Revenue and Fiscal Affairs Office.

"We have to be very careful about putting our trust in maintaining and building roads in a return that is not necessarily going to be fruitful in the long term," Rep. Gary Simrill, chairman of a special House committee studying the state's infrastructure woes, told The Greenville News.

Simrill has said he wants to adopt a "fix it first, fund it second" approach, meaning lawmakers should try to address governance and efficiency issues at the state Department of Transportation, including trimming the system of thousands of miles of short local roads, before debating added revenue.

But when that debate begins, Simrill says, he wants to look at ideas including swapping a sales tax for the gas tax and placing a state sales tax on the 2016 ballot for voter approval.

He said he also wants to study the idea of an inverse gas tax, in which the tax adjusts up or down based upon the price of fuel.

Other lawmakers have suggested a bevy of alternate sources for road funding, including raising the vehicle and driver's license fees, increasing fees for out-of-state truckers, creating a fee for insurance companies, and creating a fee for those who drive hybrid or alternate fuel cars.

Gov. Nikki Haley has threatened to veto any increase in the gas tax, one of the lowest in the nation and last raised in 1987, spurring Simrill and other lawmakers to consider alternative revenue proposals.

DOT has estimated the state has a $42 billion funding shortfall for transportation until 2040, or an annual deficit of almost $1.5 billion.

Rep. Chandra Dillard, a Greenville Democrat who sits on Simrill's committee, said the figures point to the need for South Carolina to use more than just fuel taxes for transportation needs.

"We absolutely must diversify our revenue streams for roads and infrastructure," she said. "I think we are behind the curve ball on that."

She said the numbers point to the impact of a coming "silver tsunami," a phrase used by former Lt. Gov. Glenn McConnell to describe the effect of the aging population.

Rep. Phyllis Henderson, a Greer Republican and a member of the committee, said she wasn't surprised by the numbers and they show the need to diversify the sources for road funding.

But she said any tax increase will not be easy, as evidenced by the recent defeat of a penny sales tax proposal by Greenville County voters.

"What makes it any different on a statewide level?" she asked "People don't support that. I'm not exactly sure how we're going to tackle this. It's a real challenge. I personally believe that I don't see us doing anything with taxes without a referendum."

She said her constituents made it clear they do not want to pay more sales tax.

Henderson said other states and even the federal government are facing the same issue of relying on the gas tax, though some states have embarked on alternative funding sources.

"It's a pretty universal problem and everyone is trying to deal with it," she said.

Another idea is to index the gas tax for inflation.

According to the projections this week, if the gas tax had been indexed after it was last raised, the tax today would stand at 30.5 cents per gallon. Had it been indexed in 1922, it would be at 27.8 cents per gallon.

Indexing the gas tax by 2 percent, according to the data, would eventually raise the annual revenue to almost $800 million by 2040.

Another funding idea is to remove the sales tax cap of $300 on vehicles or calculate the tax as a percentage of the sales.

New car sales, analysts say, have already passed their peak and are not likely to hit that level again.

Simrill said he likes the fact that sales tax revenue as a percentage of personal income in the state has continued to decline, meaning it does not hurt people as much in their pocketbooks.

Dillard said she is uncommitted to any single funding idea.

"I am more attuned to those ideas that capture as many users as we can," she said. "I think we would do ourselves a disservice nitpicking things that don't have much bang for the buck."